Are patent pools the solution to smartphone lawsuits?

Two years ago, Dolby subsidiary Via Licensing started getting together with companies that would be interested in creating a "one-stop shop" for paying for patents that cover LTE, or Long-Term Evolution, a newer, faster type of cell phone data transmission. Now, the pool has formed, and Via is eager to sign patent licenses on behalf of the 10 companies it represents—but the question remains as to whether anyone will sign up.

The ten companies working with Via represent several big telecom companies, mostly from outside the US. The full list of licensors includes four American companies: AT&T, Clearwire, Hewlett-Packard, and DTVG Licensing (owned by DirecTV); Japanese telecoms KDDI and NTT Docomo; as well as Telecom Italia, SK Telecom (Korea), Telefónica (Spain), and ZTE (China).

In theory, the idea of a patent pool is to make it simpler to overcome the legal woes that sometimes accompany new technology. It seems straightforward that if you have to negotiate a vast array of rights to be in a particular business, it's a whole lot easier to do one negotiation than to do dozens or hundreds of separate ones.

Executing one in the real world, however, is likely to be a different story. The modern mobile space is turning out to be uniquely litigious. Even if the Via patent pool is successful in getting many licensees, companies that have paid up will still be susceptible to lawsuits on "feature" patents, like the ones asserted by Apple against Samsung. Joining a patent pool made up of big operating companies also won't stop patent trolls from coming out and filing suit, although such suits are unlikely to get injunctions that knock a product off the market.

Via Licensing President Roger Ross touts his group's decades of experience in licensing patents, and successfully licensed more than 5 billion devices to a patent pool covering the technology for the AAC audio format. He added that the group has worked closely with the DOJ to avoid any antitrust questions around creating a patent pool; that problem has plagued a competing patent pool group, MPEG-LA.

The pool will ultimately need many more than 10 members to be credible; just one of the licensor companies currently in the pool, AT&T, is a major US cell carrier.

In an interview, Ross said they were negotiating with 26 companies in all, and the initial members are just a start."If you were to sign tomorrow, you would have resolved 10 potentially costly disputes, each of which could enjoin your product or tax your product in multiple markets," said Ross. "You've saved a lot of money, and have patent peace with some significant players."

Another potential roadblock: current Android litigants are the ones using standards-essential patents to defend themselves—a controversial practice. They're hardly going to want to assign those patents to a pool organization when they're trying to use them in court.

The way Ross sees it, the heavy litigation in mobile will actually push people toward the pool solution, because it could bring the cost back down to earth. "The litigation is the driver that will cause the pool to be successful," he said. "Judges, competition authorities, and standards authorities are tired of these essential patents being used to leverage a higher-than-reasonable return."

Via won't reveal the cost of joining the pool, but Ross said the fee will be in the "single digit dollars" per device. Fees will vary, with smaller devices like dongles costing less than smartphones and tablets.

Works great when firms are actually committed to FRAND; no reason to expect the pool to solve problems with (a) firms who are dishonest about their FRAND intent. Also: doesn't solve problems with (b) trolls, (c) patents not declared essential to a standard (and therefore not in the pool), (d…) world hunger….

Patent pool seems to have worked exactly as designed for h.264, wifi, others, with obvious exception of firms like Moto pulling the (a) not in pool so they can make up fantastical claims stunt. Except that by Google licensing the h.264 pool, apparently they ARE committed to license after all.

Maybe a pool works even in some cases where it doesn't look like it will.

They can not eliminate patent trolls (practicing entities will use patents not in the pool, non practicing will never have any need to join in the first place).

They can not eliminate uncertainty of patent litigation risk management. You will still never be able to asses risks involved with patent litigations, nor will you be able to guess amount of $$ that will be needed to secure your business from expenses involved with such litigations.

They will not guarantee that patents will not be "stretched over" to competing technologies just for increasing FREAR over using competing techs. (aka. MPEG-LA we have patents over WebM but will not show it to anyone! But will sue in indefinite future unless you stick to our H264)

What would solve SOME of the burden:* Free and available to EVERYBODY procedure of invalidating patent (so that cost of defending invalid patent is always lower than paying off license from trolls)* Patent fees limited to percent of cost of device for ALL patents. (so patent fees can not skyrocket device price for as much as 300 000 % -- every smartphone is belived to infringe 300k patents, 3% for each ...... )* Obligatory payment and license for FRAND patents on standard license terms dictated by law. (So companies can not evade licensing FRAND patents, but also companies using patented standards can not evade paying license fees!)* Obligatory FRAND license for any patent that is used in de-facto standard, and for every patent needed for interoperability, and for every patent needed for data exchange (patents related to file formats)* Disbanding wilfull infringement for anything else than infringement after owner of patent informed infringing entity. (So companies can at least try to be on the green. Since there is no way to know for 100% sure that you are on the green!)

That would help solve SOME problems. You still would have problem of checking if you infringe as costs for patent layers would probably exceed any economic value. Etc.

A clear and uniformly enforced definition of FRAND would be a better idea, IMO. We'll never get that from the IP owners, pooled or otherwise, so without legislation it's a pipe dream . A pool just adds some boundaries for the participants, and for their specific IP only. If the IP were not standards-essential, then a pool would be out the question, right? So nailing down FRAND would solve a lot more of the problems, and on a broader basis.

Apple is at the center of the current pattern of law suits. Patent pools will not solve that problem because Apple's primary intellectual property has nothing to do with patents. That intellectual property consists of design elements that would not have been replicated by another implementer unless they copied Apple's design. There is no reason why Apple should or would want to license this kind of intellectual property. Dealing with the problems surrounding it is primarily a question of reaching a legal decision on which Apple claims are valid. I don't know whether the term "design patent" is just a poor choice of words or whether the law has actually confused this kind of intellectual property with patents. But, if it has, poor quality law, might also be a problem in reaching a resolution.It remains to be seen whether solving the dispute over knock off designs will resolve the explosion of law suits or not. Some indications suggest that Apple also has the idea that it should have exclusive use over some of its technology patents that wold exclude competition from implementing the protected technology. In this case, the primary problem would be Apple's attitude. Patent pools may be a convienient way to handle some kinds of patents. But, when industry participants have adopted reasonable attitudes towards intellectual property, they have been able to resolve their differences without many law suits.

The way Ross sees it, the heavy litigation in mobile will actually push people towards the pool solution, because it could bring the cost back down to earth. "The litigation is the driver that will cause the pool to be successful," he said. "Judges, competition authorities, and standards authorities are tired of these essential patents being used to leverage a higher-than-reasonable return."

Via won't reveal the cost of joining the pool, but Ross said the fee will be in the "single digit dollars" per device.

It would be interesting to know the amortized value of patent-related legal expenses on a per device basis in order to understand if the "single digit dollars" amount quoted above would be a savings.

Based on the $207 manufacturing cost for the iPhone 5 quoted by IHS, the Via pool membership fee could be up to 4% of the overall unit cost.

I think this will just be another extra cost for smartphone companies (and thus users) with no benefit and without solving the litigation problem. They will have to buy in to protect themselves there, but then also still have to negotiate other patents and protect themselves from litigation as well.

All this will do is raise the barriers to entry for everyone else. In the long term, it makes the problem worse, not better, and creates the illusion that the problem has gone away so congress won't feel the need to act (not that they are capable of agreeing on what to have for lunch, much less patent reform).

I'm seeing this more as a play for the cellular carriers to help avoid being relegated to a commodity/dumb pipe. It gives them even more control over manufacturers, as they would now control a pool of patents to wield against the manufacturers. I say hell no to this idea. This should be done by the manufacturers and not the carriers.

No, not really. The only good solution to smartphone lawsuit madness is a reform of the patent system.

No, the only solution to the lawsuit madness is to eliminate patents completely. Patent pools form a barrier to start-ups. If patent pools existed in the 1970s, there would be no Microsoft, no Apple. Patents need to be eliminated.

[quote=article] "Judges, competition authorities, and standards authorities are tired of these essential patents being used to leverage a higher-than-reasonable return."[/quote]

This is a very strange statement. We have apple and others trying to block people with design patents and similar low level patents but expect to get access to the vital patents for cheap. Vital, standard essential patents are what makes the phone actually work. Without it there is no product no matter that your square thingie has 4 rounded corners.If non vital design patents are worth blocking the competition than logically the essential patents must be much more valuable as they are essential (as the name would imply).

No, not really. The only good solution to smartphone lawsuit madness is a reform of the patent system.

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ditto

Consortiums like this normally just create a good-old-boys club that controls who can enter the market. Instead of one having a monopoly, they just collude together. Either way, consumers pay the price.

It's a half-baked solution to the problem these companies created by wanting to reduce competition. Why turn monopolies into cartels, and put sharks into patent pools? Fix the patent system, or better yet abolish the entire concept of government-sanctioned monopoly.